iBiquity sale to DTS

DTS, Inc (NQ:DTSI) is to acquire iBiquity for $172M USD. This was the headline about the middle of last week. With that announcement, we get to see some of iBiquity’s financials; revenue of $40-50 million this year with a margin of 30-36%.

My question is, who or what is DTS? DTS was initially known as Digital Theater Systems, Inc. They specialize in digital surround sound technology, by developing or acquiring companies that created various CODECs and surround sound technology.

An image of 35 mm film showing four audio formats, from left to right: SDDS (blue area to the left of the sprocket holes), Dolby Digital (grey area between the sprocket holes with the Dolby “Double-D”), analog optical sound (the two white lines to the right of the sprocket holes), and the DTS time code (the dashed line to the far right). The DTS time code syncs picture to a CD-ROM that contains the surround sound sound track.

DTS continues to develop surround sound technology and makes money by licensing that technology to consumer and professional audio clients. According to their 2015 Q2 financials, they are on track to make $140-145 million this year with a 25-30% margin.

My next question is, what does this mean for HD Radio? It is much harder to answer this question, but here are some general observations:

DTS is a publicly traded company. Financials and other information are a matter of public record. It seems likely that the operation will be more transparent.

DTS operates with higher revenue and lower margins.

DTS has a high interest in mobile markets; devices and dashboards.

DTS has a history of continued development and marketing of technology it owns.

There are a couple of different scenarios possible; the first is business as usual. I think this is the least likely situation. IBiquity as a company and HD Radio as a technology basically flat lined ten years ago. A successful company like DTS would not likely purchase something that does not have growth potential.

Second possibility, DTS will keep the same licensing structure, but upgrade the HD Radio technology. From a audiophile’s perspective; HD-1 sounds good, HD-2, 3, and 4 channels not so much. This is especially true as more channels are added and the same size pie (aggregate digital bandwidth) gets divvied up into smaller and smaller pieces. One area where HD Radio could shine is to get rid of the HD2-4 channels and create an IP multicast system. IPv6 has greatly improved multicast performance which might enable a free data stream download, minimal data back haul via mobile data for an interactive, low data usage digital experience. That would free up a lot of translators.

Third possibility, DTS will reduce the licensing fees for broadcasters and consumers and accept a lower margin on existing technology. DTS will use HD Radio as a route to get their technology into dashboards, which is where they see their future profits. Remember, the self driving car is only a few years away and mobile entertainment will be all the next rage.

As far as AM HD Radio goes, I don’t see anything happening with that. Medium wave broadcast channels do not offer enough bandwidth to facilitate reliable digital transmission.

In any case, for better or for worse, change is coming to terrestrial radio.

9 thoughts on “iBiquity sale to DTS”

I saw a similar announcement elsewhere. Overall, I think this development is positive for digital radio in the USA. Although, I’d prefer Digital Radio Mondiale (DRM) as the standard, iBiquity’s standard could be improved enough as a viable substitute. I transmit DRM on the MW band in the USA via Title 47, Part 15 rules. I use ASPISys’s DRMAX-1 transmitter and the results are good on the MW band even with 10 kHz of bandwidth. iBiquity’s hybrid mode definitely needs to be abandoned on the MW band, but a strictly digital mode should be alright on the MW band. I, too, want to see iBiquity’s standard improved. I just recently bought an HD radio for the first time, but reasonably priced radios are still hard to find.

I’m a bit curious on why would DTS offer that much money for technology that appears to be on the decline. I don’t see small market stations forking out money to license it and the major 50kw blowtorch by me hasn’t had it on (or at least every time I tune in it’s not there) so what is DTS really getting for the money.

I pointed out some years ago in where I believe they missed the boat. If somebody like Apple, Microsoft, Real or even Adobe developed the codec in parallel with their media streaming codecs there would have been much more opportunity not only for lower development costs and adoption fees but perhaps the development of a radio for the connected dashboard that could switch between an over-the-air signal and a station’s internet stream via WiMax or similar technology. I fail to see that much value of what tangible assets that encompass the iBiquity branding and intellectual property.

I hope whatever comes, it can still be received freely on a one way path. All this talk of IP this and that means that the back haul will be required. This means some kind of internet connection. If so, why not go LTE broadcast and be done with it.

I hate to be a wet blanket, but the mobile TV standard was just getting started when everybody went conditional access. It was gone within months.

@ChrisR: IP multicasting is a one-directional internet service; it does not require packet acknowledgement like other IP services. Bad packets are simply discarded, not re-transmitted. But I do understand some of the confusion, since Ibiquity defines multicasting as “the ability to broadcast additional programming simultaneously with the main program service.” HD radio already does this, but it’s not the same as IP multicasting. Wikipedia defines IP multicasting as “a method of sending Internet Protocol (IP) datagrams to a group of interested receivers in a single transmission.” If you operate an internet streaming service, this means you could send a single stream to an Internet Service Provider, rather than sending a separate stream to every subscriber. That would substantially reduce your bandwidth requirements (and the cost of broadcasting on the internet.) It also benefits the ISP, as it frees up their bandwidth for other services. But IP multicasting benefits the radio audience in a different way:

In this case, digital data packets received via radio should (to some extent) be routable on the internet. That implies you could probably use a software-defined receiver with your internet router, to relay programs from multiple digital radio stations to individual devices on your home network, such as a tablet or mobile phone. With the right software, all of those devices can become a virtual ‘HD radio’. But IP multicasting could facilitate a variety of other services too. (Basically any internet content that realistically fits within the channel bandwidth.) And software or codec updates could be delivered over the air to dedicated receivers, like they do with commercial satellite TV systems. This would prevent digital radio from suffering the fate of terrestrial digital TV (where you are stuck with an obsolete audio/video codec that represents a very inefficient use of bandwidth.)

In any case, I would support DRM since it is an open standard which is capable of all the same things. I refuse to use proprietary broadcasting systems like HD radio that require royalty payments. It’s just my way of protesting when a company bribes regulators to grant them a monopoly on broadcasting technology within a particular geographical area. (All organized crime is territorial and that is the root of terrorism. The airwaves belong to the public, and government bureaucrats have no lawful authority to say that you can only broadcast in digital if you use one company’s system. Under the current regulatory regime, HD radio is a protection racket, which represents an abuse of the state’s police power.)

This is correct, UDP does not need confirmation of receipt, and IPv6 has several added multicast features that make IP multicast work better than IPv4. The point is; data is data, it does not matter if it is framed with ethernet, HD Radio, DRM or some other format. There are a bunch of linearized FM transmitters out there that can transmit between 100 to 150 kbps that are under utilized. Some of these stations are quite powerful. The possible uses are endless.

HD-Radio and DRM are both compatible with multicasting. However, if you believe that IP datagrams are the lowest common denominator, then why is DRM the only digital broadcasting system that works on shortwave?

“DRM allows multicasting and datacasting on all bands and, perhaps most importantly, is an open standard, unencumbered by a restrictive licensing regime. (Of all of HD Radio’s fundamental detriments, its proprietary nature is the one that’s done the most to hinder its adoption.)”

I am a networking guy, we studied Ethernet frames and the transmission thereof for an entire semester. Ethernet is a known entity, it interfaces with all OS’s and easily hands off to multiple protocols. The hardware is very well developed and very inexpensive on both the wired and wireless sides. HD Radio and DRM framing is unique and proprietary. HD Radio applications are clunky and underdeveloped. So, why reinvent the wheel? Use something that known, well developed, inexpensive and already in use.

If you go back and read through past entries in this blog, you will find that I have looked at DRM several ties. I don’t know if a digital modulation scheme will ever work properly on MF and HF. I have listened to DRM shortwave broadcasts, they sound great as long as there isn’t any fading. I have also listened to AM HD hybrid broadcasts, again, the audio quality is excellent, as long as there are not too many bit errors. My comments here are based more digital radio in the VHF band.

150 KILOBITS! That is enough for 25 voice-grade audio channels encoded in xHE-AAC! No need to explain to a station manager what that could do for their business!

I detect a fair amount of sarcasm here. That’s okay. 150 kbps is enough for two 64 kbps stereo channels in HE-AAC plus overhead, which would sound pretty good. BTW, 150 kbps is in the analog/digital hybrid mode. An all digital signal would have a much higher bit rate.

DRM can be received adequately on HF bands as long as the broadcaster uses a robust mode with a Main Service Channel (MSC) of 16 QAM. Unfortunately, most broadcasters still use a MSC of 64 QAM on HF bands with predictably marginal results. Fading on the HF bands can be largely overcome with a MSC of 16 QAM.

I appreciate your insightful and relevant posts, Paul. Keep it up as long as you’re able.